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Pragmatic Capitalism

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The US Dollar isn’t fiat

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Everybody on the planet seems to be telling me that the us dollar is a fiat currency, but it obviously is not. Money is created by banks through loans. If a 300k mortgage loan is made, then 300k dollars are created which are backed by a tangible private sector asset, a house, and also an income and promise to repay. The US dollar is backed by the private sector. Of course it is also backed by the federal government laws, huge asset base, and power of taxation. This makes the us dollar the most thoroughly well backed currency in human history, it’s not just a piece of paper. To me, fiat means not backed, i.e. bitcoin, which is the stupidest asset bubble of all time.

Considering how many brilliant people have stated the usd dollar is a fiat currency, and considering there is only one hillbilly from colorado(me) saying that it ain’t fiat, I am assuming I am missing something. Thoughts?

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Posted by laskerfan12
Posted on 08/18/2017 9:52 PM
158 views
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This kind of question is not unexpected. Some folks don’t have any idea where money comes from. If a bank credits your account with enough to buy a house you could instead trade it for a giant pile of greenbacks (currency), backed only by your faith in Uncle Sam and his laws that dictate this is our unit of exchange e.g. fiat currency.

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Posted by Dennis
Answered on 08/18/2017 11:32 PM
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    Yes fiat is an inappropriate term for describing dollar bank deposits. As you say the deposits are backed by promises to pay which are obligations to supply goods and services to deposit holders. And similar with Fed notes , either a government enterprise provides goods or services ,or someone who pays tax does the same to fund the Treasury bonds held by the Fed.

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    Posted by Dinero
    Answered on 08/19/2017 1:18 PM
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      It’s still fiat. The thing that makes the banking system so well accepted is the fact that the govt will enforce and protect the money that is issued by that system. Default on a loan and test it out. You’ll go to court and a bankruptcy proceeding as the bank claws back whatever it can. You could say that bank money is private money with public support.

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      Cullen Roche Posted by Cullen Roche
      Answered on 08/19/2017 1:21 PM
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